Friday December 6, 2019

High finance: The business of medical marijuana

Medical marijuana is predicted to soon become a €55 billion industry in Europe, and a number of Irish businesspeople are leading the charge as they navigate a minefield of regulations across the world

Daniel Murray

Business Reporter

@danieltmurray
30th June, 2019
6

The launch of a five-year pilot programme on access to medical cannabis last week marked a change in national regulation that reflects the slowly evolving – though still conservative – public attitude to cannabis in Ireland. Internationally, however, attitudes have long been changing, and medical markets have opened up. Successful operations in these markets are showing that medical-grade compounds from the once outlawed plant can be medically prescribed, legitimately commercialised and therapeutically effective. As a result, the world is slowly beginning to accept cannabis as something more than just a recreational vice.

At the forefront of that emerging global business community is a variety of Irish executives working in production, distribution, market intelligence, investment, consultancy, agriculture and scientific research. These businesses range from fast-growing start-ups to established multinationals.

They are faced with a unique set of business challenges in an emerging sector where regulation is strict and varies across markets. They are on a mission to supply medical cannabis to the world – and they have Ireland firmly in their sights.

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Medical cannabis is made up of a variety of cannabinoid compounds that are generally prescribed by doctors and administered by pharmacies or licensed outlets to treat a range of ailments.

Different grades of medical cannabis are now prescribed in jurisdictions around the world, with mounting – though still scattered – evidence that it can effectively treat some symptoms associated with multiple sclerosis, epilepsy, intractable nausea and chronic pain.

Other forms of cannabis products include non-medical over-the-counter CBD (cannabidiol), marketed as a health and wellness supplement with no THC content and therefore no psychoactive effects; and recreational cannabis, a product with psychoactive THC in it, consumed to ‘get high’ and only legally available in a very limited number of jurisdictions. There are also hemp markets, using the non-psychoactive fibres of the cannabis plant as alternative bio-materials.

Several Irish business people are heavily involved in the thriving medical cannabis industry, servicing markets where the medical regulation of cannabis is already a reality. From emerging markets in Europe to maturing markets in Canada and the United States, these Irish executives and entrepreneurs are making their mark on the international stage.

Production and distribution: Shane Morris

Shane Morris considers himself the “most boring man in the cannabis industry”. A former Teagasc Walsh fellow, holding a PhD in plant science and policy from NUI Galway, he doesn’t exactly fit the profile you would expect from a senior executive in the second largest cannabis company in the world.

Canadian-based Aurora Cannabis describes itself as a “medical marijuana producer and distributor”. Morris joined the company in 2018 as senior vice-president of product development and regulatory affairs. Listed on the New York Stock Exchange, Aurora has a market capitalisation of $12 billion. In its four short years it has grown from a staff of 40 to a staff of 2,800, with a presence in more than 24 countries, many of which have already developed into export markets for Aurora.

“We are exporting cannabis to Germany,” Morris told The Sunday Business Post. “We’re exporting cannabis to Italy – in fact to the Italian army – we’re exporting cannabis to Britain, to Luxembourg. We’ve got exports into Poland, Australia and various other jurisdictions. This is all medical cannabis products.”

Morris’s job as head of regulatory affairs is unique and provides its fair share of headaches. Aurora sits at the crossroads of several highly regulated sectors, including pharmaceuticals and agriculture. When it comes to pharmaceutical regulation, Morris is in charge of making sure its product meets the same standards as other controlled medicines in relevant jurisdictions.

“It’s a fascinating industry because with medical cannabis, it’s not just a plant,” he said. “So in the same way morphine is made from poppies, we make a medicine from cannabis. So we have to meet very high standards in Canada for production and then for exports to Europe we have to meet what we call EU GMP (Good Manufacturing Practice).”

The GMP requires that medicines are of consistent high quality, are appropriate for their intended use, and meet the requirements of the marketing authorisation or clinical trial authorisation. It is coordinated by the European Medicines Agency. On top of this, the status of cannabis as a restricted plant requires additional regulatory and security standards to be met on the production end.

Martin O’Brien set up Foxworthy Farm on an 82-acre site in Sonoma County in California and began cultivating a variety of cannabis strains

“Obviously cannabis is a highly regulated plant. We have to build facilities that are exceptionally secure and meet security standards, and also the people involved in handling the products need to be security cleared by the Canadian mounties. There has been a higher level of oversight by the regulator – so a high level of unannounced inspections and monthly reports to the regulator. We have to account for every single gram and every bit of waste.”

It can be hard to escape the mental imagery of cannabis being smoked, but Aurora has to consider a range of consumption methods for its customers. This is not only because of patient preference, but also because of the need for consistent dosage.

“Inhalation is often not the preferred option because you don’t get the same level of repeatability of dosing etc,” said Morris. “So we work very hard to bring oils to market, soft gels and capsules as well. We’re also working on tablets; they haven’t gone to production yet, but they will be shortly. So there’s a range of very easy doseable, trackable, repeatable formats, which is critical for the medical side.”

Aurora Cannabis has already been lobbying the Irish state on introducing medical cannabis and is very interested in supplying the Irish market now that the Minister for Health has cleared a pilot access programme for five years.

Morris says that there are potentially 50,000 patients who might benefit in the Irish market. This is only a fraction of the 300,000 patients in Canada now accessing medical cannabis, but nevertheless Aurora is keen to get in on the act.

“We look forward to working with the Irish regulators, patient groups, doctors and researchers to advance patient access to high-quality pharmaceutical-grade medical cannabis products under the new programme. Aurora is delighted to have the opportunity to help and support Irish patients in the same way we have in many countries around the world. We will also explore any opportunities to work in Ireland to support local production of medical cannabis if regulations allow,” he said.

Market intelligence and consultancy: Daragh Anglim and Patrick McCartan

London-based Prohibition Partners is a cannabis market intelligence company. Its bi-annual cannabis reports have grown to cover nearly all continents, and they are regularly used and cited by politicians, media and executives around the world. The name reflects the abnormal markets it reports on, where cannabis can be prohibited to different degrees for various reasons. Providing legitimate businesses with the maps to navigate these markets is part of the service that Prohibition Partners offers.

New managing director Daragh Anglim is from Dublin and holds a master’s in sustainable development from DIT. His previous work with Fáilte Ireland laid the groundwork for dealing effectively with a global audience. Founded in 2017, Prohibition Partners set out to fill a major gap in the market.

“It was very difficult to find reliable intelligence,” Anglim told this newspaper. “As with any burgeoning industry, there’s always a gap of research and intelligence, but really within the cannabis sector that was quite stark at the time.”

Prohibition Partners has produced four editions of its European cannabis report. It has also produced an Asian cannabis report, African cannabis report, Oceania cannabis report and an LATAM cannabis report – covering Latin America.

“We’re currently working on the North American one and by the end of the year we will be the only company in the world which has covered all of the major level regions in terms of data and analysis,” Anglim said.

Products from Foxworthy Farm

Prohibition Partners’ reports give country-by-country breakdowns with a focus on market fundamentals, regulatory environments, commercial opportunities, healthcare systems and consumption patterns. They are riding the wave of an industry that is growing rapidly, providing valuable information for investors operating in a legal and regulatory minefield.

“When people talk about the green wave and the green rush and the money to be made in cannabis, a lot of that conversation is focused on what’s happening across the water in North America and Canada. But there are some very interesting developments within the European context, but all within the medical space. So Europe is a pure medical market at the moment,” Anglim said.

By 2028, Prohibition Partners believes that medical cannabis will be legally available across all of Europe. If this comes to fruition, it predicts a medical market with a value of €55.2 billion, making it one of the biggest in the world. That European cannabis market is already opening up quickly as attitudes and regulations begin to change. Within Europe, the major market that everyone is watching is Germany.

“What’s interesting with the German market is that German health insurance will reimburse for medical cannabis on the national health system. That’s a very welcome development because that actually means that medical cannabis is being treated as a regular medicine and it means they can develop a functioning medical market,” Anglim said.

The German market opened up in 2017 with the introduction of new medical cannabis legislation. The demand for medical cannabis has been very high since its legalisation, leading regularly to shortages in pharmacies due to their reliance on imports. To rectify this, Germany is looking to domestic cultivation.

“The other interesting development in Germany is they have just started to grant domestic cultivation licences. Germany has been importing its medical cannabis, predominantly from the Netherlands and Canadian companies, but now they have licensed a number of operators to domestically grow cannabis,” Anglim said.

Of those operators, several are Canadian, indicating the eagerness of Canadian producers to get in on the European market. Germany is a natural entry point, with the domestic market expected to reach €6 billion in the next ten years.

Irishman McCartan recently became a partner in Prohibition Partners. He also runs his own cannabis consultancy service in the United States called Astellae. He sees endless opportunities in the cannabis space.

“Because it’s so new, there’s so much need for insights and expertise in various different areas of the industry and there’s not that much of it out there. That’s the reason why we’ve grown so quickly and adopted so many new clients. It’s because of the demand for expertise within the areas that we provide,” he said.

McCartan is also very interested in the contribution that cannabis can make to the growing bioeconomy sector.

“There are so many parts of the plant that can be used for many different types of industries. Oils can be extracted for human consumption, human health and wellness. Oils can be also extracted for biofuels. The stalks and the seeds, the fibres can all be used for packaging. Oils can be used for foods . . . hemp oils and hemp milk,” he said.

Prohibition Partners assessed Ireland’s potential in its most recent European Cannabis report. It found that, by 2028, Ireland could potentially have a medical market worth €1 billion. Supplying that market based on current cultivation regulation would have to be done by big operators from abroad.

Ireland is currently only allowed to cultivate cannabis plants with less than 0.2 per cent THC (tetrahydrocannabinol), the psychoactive ingredient that gives both the ‘high effect’ and in many medical applications, the therapeutic effect. The greater the THC, the greater that intoxication effect. The lack of THC in Irish cannabis cultivation means growers currently supply hemp and over-the-counter non-medical CBD markets exclusively. To begin supplying medical markets in Ireland, this community would need to see the regulation of high-THC cultivation changed. There are currently no plans to change that.

Investment: Stephen Murphy and Rob Reid

Waterford man Stephen Murphy founded Prohibition Partners, but his interests quickly grew beyond market intelligence and he soon found himself investing in several cannabis-related companies.

Murphy now heads up London-based European Cannabis Holdings (ECH) along with Dubliner Rob Reid. Their ambition is to bring what they believe are the benefits of medical cannabis to rapidly opening markets in Europe. Murphy and Reid have amassed an impressive portfolio of companies with a clear and common vision on medical cannabis.

“We have a strong mission and vision and we try to make sure that flows down through each of the portfolio companies,” Murphy said. “We have a number of medical assets, including clinics, which provide patients access to quality professionals. We have the Academy of Medical Cannabis, which is our training platform, providing medical professionals access to education materials and education courses,” he said.

ECH also runs Cannabis Europa, an up-market conference that aims to bring together leaders of policy, science and business. It has held successful conferences in major cities, with high-level politicians and medical professionals from across Europe coming together just last week in London. According to Murphy, the purpose of these conferences is to “discuss medical cannabis accessibility and availability in Europe and what it means for the future of their health systems, legal systems, economies and society as a whole”.

Aurora has grown from a staff of 40 to 2,800, with a presence in some 24 countries

Murphy thinks Ireland would be an ideal location to hold the conference some day, saying: “We would love to take Cannabis Europa to Ireland. Being Irish, we have strong links, obviously. We see there is a serious need for informed debate on medical cannabis in Ireland.”

ECH recently launched Astra-Health, a platform for the licensed importation of medical cannabis into Europe. It is expected that Astral-Health deals will be announced in the German, French, Italian and Spanish markets within the next few months.

Murphy believes that the old-school view of cannabis as a plant that is smoked just for recreational reasons is dated.

“The formulations and extraction processes and the creation of new products means everything from transdermal patches to creams to balms and oils and so forth. The more medical cannabis is shown in the form of existing pharma products, the better the mindset will be that this is just another form of medicine,” he said.

Murphy claims to have no interest in the European recreational market, despite huge financial potential existing there. “The importance of Europe and the focus for us needs to be medical health and wellbeing. That is where there is the immediate demand and the immediate need to ensure proper legislation. Trying to mix both doesn’t make sense,” he said.

Still, it is hard to see ECH not becoming eager to get involved in recreational markets in Europe, were they to open up.

Cultivation, distribution and dispensing: Martin O’Brien

Martin O’Brien moved from Cork to San Francisco back in the early 1990s. In 2001, he set up what is now the longest-running medical cannabis dispensary in the world, known as the Patients Care Collective in Berkeley. Operating in an uncertain and ever-changing regulatory environment, O’Brien took a huge risk.

“My dispensary in Berkeley, consistently over 18 years it’s unchanged. I ran that for many years. I never ever cultivated, because the people who had dispensaries and cultivated were the ones that got busted by the feds, all the time,” he said.

When he returned to the Patients Care Collective in 2015 after a ten-year hiatus making documentaries, the regulatory environment had changed and O’Brien pursued a life-long dream to cultivate medical marijuana and dispense it in two separate operations.

He set up Foxworthy Farm on an 82-acre site in Sonoma County in California and began cultivating a variety of cannabis strains and distributing it to his own dispensary. However, a change of the law again in 2018 saw cultivation and distribution segregated, leading O’Brien to a creative solution.

“We found out – because they keep releasing updates on the laws – that you can’t be a farmer and a distributor any more. I used to be able to take the stuff from my farm to my dispensary, no problem. But since the laws came down on January 1, 2018, we were no longer able to do that. So we started our own distribution company called California Cannabis Distribution Company, or the CCDC,” O’Brien said.

Dr James Linden, founder, Greenlight Pharmaceuticals which has developed a research and development programme around molecules from plants, primarily cannabis components Pic: Fennells

O’Brien’s skilful navigation of the prevailing state and federal laws has kept him out of trouble with authorities over the years. California is one of the most mature legal cannabis markets in the world. Despite this, it remains a complex environment, with a variety of cannabis products available in different areas. Interestingly, O’Brien says the primacy of medical marijuana and its superior quality is still evident.

“Much of California has still got cannabis banned in one way or another. Maybe 20-25 per cent of the jurisdictions have access to medical cannabis, and then a lesser percentage of that have access to adult (recreational) cannabis. When they gave out the adult cannabis licences for manufacturing and distribution for retail, there still was not one adult-use cultivation licence issued by the state. Everyone, whether they are adult or medical, gets supplied by medical growers,” he said.

Working in cultivation, O’Brien has to understand the science of agriculture to produce the highest-quality product in the most efficient way possible. Foxworthy Farm’s cannabis is pesticide-free, cured over many months and cultivated with medicinal relief properties in mind. One of the biggest differences O’Brien has noticed is between outdoor and indoor cultivation.

“With greenhouse, you can have a conditioned environment: it’s got heated floors, air exchangers, air movement; it’s a much more dialled-like situation. So many people are doing LED and the weed is fucking phenomenal,” he said. “There’s something about growing with LED lights. My next project I’m going all LED.”

Naturally, O’Brien welcomes the government’s new medical access programme, but he believes cannabis is about more than just better outcomes for patients.

“It’s an empowerment thing. It’s an empowerment thing from an environmental perspective, it’s an empowerment thing from a health perspective. We’ve been drilled down our whole life that pot is wrong. I don’t see anything wrong with people of an older generation having that perception, but it was fed to us.”

Research: James Linden

Closer to home, James Linden runs Greenlight Medicines, a Dublin-based pharmaceutical research company with a global outlook and a focus on cannabis. Linden is a PhD biochemist and neuroscientist with a deep knowledge of plant medicine.

After his doctorate, Linden researched Alzheimer’s disease as a post-doctorate in neuroscience at Trinity College for a year, before moving into the world of pharmaceutical sales.

Aurora Cannabis, a medical marijuana producer and distributor based in Canada

In 2014, Greenlight Pharmaceuticals was formed by Linden and his colleagues to develop a cutting-edge research and development programme around molecules from plants, primarily cannabis components.

A large number of principal investors and research institutes in Ireland, Britain and the US were drawn together to form a global research network. Linden’s vision is that Greenlight will one day become a world leader in plant medicines.

“I gathered investments of about half a million over the first two and a half years,” he told The Sunday Business Post.

“€100,000 here, €50,000 there. With that we got different smaller research projects moving in the universities. We then went about developing our own revenue stream, and when we had our own revenue streams stabilised about six months to a year ago, we were then able to push out more. To date we’ve got roughly €3 million cash invested in the company and roughly a million turnover.”

Linden stabilised Greenlight’s revenues by producing an over-the-counter CBD supplement, which is now sold into pharmacies all over Ireland and soon to be launched in Britain.

This has provided the revenues to continue research into medical cannabis applications. To do this, Greenlight needs access to what is currently an illegal drug in Ireland.

“From a research point of view, the Republic of Ireland is fine. It’s progressive. You can do what you need to do under controlled drugs licences. We have those in place in the various sites where we are researching THC or other controlled cannabinoids,” he said.

Controlled cannabinoids in Ireland include CBN, THC and THCV. Despite the ability to access these substances for medical research purposes, the cultivation of cannabis plants in Ireland is still strictly regulated, allowing the growing of plants only with a THC content of less than 0.2 per cent. Linden would like to see that changed so that they could cultivate their own research materials and products in Ireland.

“We would like to bring as much of our cultivation to Ireland and as many of our opportunities to Ireland so that people can get jobs and be involved. That would be great. So let’s hope the framework is put in place,” he said.

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This evolving and cross-disciplinary industry is testing the talents and flexibility of a range of Irish-led businesses. With projections of further growth, especially in the European medical cannabis space, this is certainly an exciting sector to keep an eye on or to consider investing in.

In this country, the introduction of a proper medical access programme will shape the Irish market and the players involved in it. Whether that supply comes from home or abroad, it is clear that the Irish will be involved somewhere along the line.

Read more: Doctors warn medicinal cannabis access may lead to push for full legalisation.

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